China’s “Corporatization without Privatization” and the Late Nineteenth Century Roots of a Stubborn Path Dependency

This Article analyzes the contemporary program of “corporatization without privatization” in the People’s Republic of China (PRC) directed at China’s traditional state-owned enterprises (SOEs) through a consideration of long ago precursor enterprise establishments—starting from the last Chinese imperial dynasty’s creation of “government-promoted/- supervised, merchant-financed/-operated” (guandu shangban) firms in the latter part of the nineteenth century. While analysts are tempted to see the PRC corporations with listings on international exchanges that dominate the global economy and capital markets as expressions of “convergence,” this Article argues that such firms in fact show deeply embedded aspects of path dependency unique to the Chinese context even prior to the fall of the Qing dynasty in 1911. To that end, this Article identifies commonalities between China’s large-scale state (imperial court)-promoted or -operated enterprises after 1870 and the PRC’s largest corporations and corporate groups that have grown since the early 1990s—commonalities which touch on the national development ambitions behind such firm establishments, financing, operations, monopoly franchise rights, corporate governance, relationship to law and domestic and transnational legal systems, the interaction between the state and other non-state sectors, and more. Conversely, the Article investigates key differences in the surrounding geopolitical, political, legal, economic, and market environments between the late nineteenth century and today, so as to explain how today’s largest Chinese enterprises are, and will be, distinct from their nineteenth century ancestors. This Article does not address the extent to which China’s corporatized, publicly held SOEs should be understood as “sovereign” for purposes of evaluating foreign sovereign immunity and the like. Instead, this Article aims to help policy makers, global capital markets participants, and even corporate governance specialists understand more concretely the underlying differences between modern China’s apparently convergent corporations, on one side, and corporate enterprises operating and financed in other parts of the world, on the other. This analysis may, in turn, illuminate the future trajectory of the PRC and its rising corporate entities as global political and economic actors of abiding power and influence.